Buying a Home in the Sun
Finding your own piece of paradise is everyones dream but can seem like a daunting, if not terrifying challenge.
A recent article from www.thisismoney.co.uk looks at how its done.
Firstly, finding the place
One of the fastest and easiest ways to search for properties abroad is to use the Internet. Popular sites include findaproperty.com, casa-Post.com, primelocation.com and casaquest.com. You can also try various property magazines like Homes Overseas, Foreign Property News and Exchange & Mart.
How do you raise the money?
If you cant pay with cash, you have two options:
1. Extend your main mortgage
This is a cheap way of raising cash. The only problem is you may not be able to get a re-mortgage for more than 75% of the second property's price and if you cant keep up payments you could end up losing both properties.
2. Take out a second mortgage
There are now various companies that give overseas mortgages from the UK, including Halifax, Abbey, Norwich & Peterborough Building Society and Barclays.
You can now also take out a mortgage in Euros. Banks offering euro mortgages include Abbey, Barclays and Natwest.
Taking out a mortgage in a foreign currency can be dangerous; for example if the pound weakens against the euro or dollar, your payments will increase. That said, there are also various tax and other advantages to buying in the foreign currency.
How much will it cost?
Apart from the actual price of the property, youll have to pay taxes and legal fees.
In France youll pay between 10% and 15% of the house price along with a regional tax and an occupancy tax if you live there more than eight months a year.
In Spain, taxes and legal fees will normally amount to 8%-10% of the property value.
In Italy, costs are between 8% and 12%.
In Florida, allow 4% of the price of your holiday home to cover stamp duty, local taxes, legal fees and set-up costs.
The expense doesnt stop there
If youre in a communal development, youll have to pay community fees for the upkeep of the property along with water and gas bills and extra insurance costs. Youll probably have to open up a local bank account so you can pay charges by direct debit too. Consult your agent or solicitor about any other local taxes you might have to pay.
What about the insurance and taxes?
If its a buy-to-let investment, youll have to declare your rental income to the British taxmen.
If youre renting out your property its essential to have it adequately insured. There are a number of specialist insurers who cater for this. You can also ask your own home insurer if they will insure your property abroad.
How long will it take?
For France, it could take up to 20 weeks, whereas in Italy, Spain, Greece and Portugal it will take around 12 to 18 weeks.
The longer it takes to complete the transaction the more at risk you are from rate fluctuations, which could add thousands to the real cost of the property.
One way around this is to arrange a spot transaction. With this you can transfer funds straight away to the agent or seller abroad, in line with the current exchange rate at that time.
Although a quick purchase is always desirable, its always better to take your time and make sure youve thoroughly researched the property and location and understand all the legal implications and procedures.
A good Lawyer and trustworthy Real Estate Agent are absolutely essential.
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